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B 26-0749

Wealth Proceeds Tax Amendment Act of 2026

26th Council Period (2025-2026) Introduced by Brianne Nadeau

The bill imposes a 3% DC tax on wealth proceeds (unearned investment income) for high-income households, based on FMAGI and thresholds.

Referred to Committee of the Whole
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WeVote Research Nonpartisan
Bill Summary · B 26-0749

Purpose and intent

  • Introduces the Wealth Proceeds Tax Amendment Act of 2026 (B26-0749) in the District of Columbia.
  • Aims to create a local 3% surcharge on “wealth proceeds” (passive investment income such as capital gains, dividends, interest, etc.) for high-income households.
  • Seeks to address revenue shortfalls and promote a fairer, more stable tax system by taxing unearned income from wealth at the local level, similar to a Net Investment Income Tax but implemented by the District.

Key provisions and changes

  • Adds new § 47-1806.03a, Wealth Proceeds Tax, to Chapter 18 of Title 47 (Taxation in DC).
  • Definitions:
    • “District modified adjusted gross income” (DMAGI) defined and linked to federal modified adjusted gross income with specified adjustments.
    • Threshold amounts for taxation set by filing status (see below).
    • “Wealth proceeds” defined largely as the net investment income concept from federal law, with specified exclusions/inclusions for certain interest, and treatment of incomplete gift non-grantor trusts.
    • “Incomplete gift non-grantor trust” defined with criteria linking to grantor trust status and incomplete gift treatment.
  • Tax base and rate:
    • Imposes a 3% tax on wealth proceeds for each taxable year beginning after December 31, 2025.
    • Tax base: the lesser of wealth proceeds for the year or federal modified adjusted gross income (FMAGI) minus the threshold amount.
  • Thresholds (to determine who owes the tax):
    • Married or registered domestic partners filing separately on a combined return: $500,000 total, split evenly.
    • Married individuals, registered domestic partners, or qualifying surviving spouse filing jointly: $500,000.
    • Married individuals or registered domestic partners filing separately: $250,000.
    • All other taxpayers: $400,000.
    • Fiduciaries filing on behalf of estates or trusts: $16,000.
  • Allocation and apportionment:
    • For nonresidents, the tax is computed as if the taxpayer were a DC resident for the entire year, then adjusted by a fraction:
    • Numerator: wealth proceeds allocable to DC under § 47-1806.01.
    • Denominator: total wealth proceeds for the year.
    • For estates or trusts, tax liability is multiplied by a fraction reflecting the portion of wealth proceeds allocated to DC versus total wealth proceeds.
  • Coordination with federal tax:
    • References to the Internal Revenue Code align with the code in effect as of January 1, 2026.
  • Effective date and oversight:
    • Takes effect after the Mayor’s approval (or Council override of a veto) and a 30-day congressional review, with publication in the DC Register.

Who/what would be affected

  • High-income individuals and households whose wealth-derived income (unearned income) exceeds the established thresholds.
  • Nonresident DC taxpayers with DC-sourced wealth proceeds, estates, and trusts with DC allocations.
  • Taxpayers with incomplete gift non-grantor trusts and related wealth proceeds considerations.
  • The DC General Fund, with projected revenue potential (as cited in sponsor materials) to be used for essential services, depending on revenue performance.

Procedural and timeline aspects

  • Introduced by Councilmember Brianne K. Nadeau on July 8, 2026; co-sponsored by Nadeau.
  • Action history shows referral to Committee of the Whole (July 14, 2026) and introduction (July 8, 2026).
  • Effective date contingent upon Mayor’s approval and congressional review period (30 days) post-approval.
  • Fiscal impact statement adopted per the council’s procedures.

Observations

  • The bill mirrors concepts seen in the Net Investment Income Tax but implements a DC-local surcharge at 3% on wealth proceeds for high-income taxpayers.
  • It uses specific thresholds and a mixed approach to nonresident and estate/trust taxation to ensure DC alignment with allocations.
  • The bill references prior attempts to create a Tax and Revenue Commission and frames the proposal as part of broader revenue resilience and equity goals.

Compiled from official sources — confirm details with the bill’s official record.

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